Tshwane challenges Eskom’s plans to supply Mooikloof Mega City

The City of Tshwane has raised a strong objection to Eskom’s plans to supply electricity directly to the Mooikloof Mega City outside Pretoria.

The R84 billion development is expected to generate R1.5 billion in electricity sales per year according to the City of Tshwane, which argues it has the right to distribute electricity to the development as it is situated in its licensed area.

The South African Local Government Association (Salga) supported the city’s objection at a public hearing on the matter held by energy regulator Nersa, and raised the argument that the constitution provides that municipalities have the exclusive right to distribute electricity.

Salga had earlier applied to the High Court in Pretoria for a declaratory order to confirm its view.

If the City of Tshwane is successful, Eskom will be obliged to enter into a service level agreement with every municipality where it distributes electricity and those municipalities will be entitled to impose surcharges on the Eskom tariffs.

This is expected to raise the cost of electricity, especially for mines and farmers.

Read: Municipalities seek exclusive right to distribute electricity, even in Eskom areas

Eskom and at least two private electricity distributors have indicated that they will oppose Salga’s court application.

Business community Sakeliga has applied to join the hearing as a friend of the court.

No date has been set for the hearing yet.

The Mooikloof Mega City was launched by President Cyril Ramaphosa in October 2020. It is one of the 62 strategic infrastructure projects (SIPs) managed by the Presidency and is aimed at kick-starting economic growth.

It is a joint project between Balwin Properties, the City of Tshwane and the Gauteng provincial government, and was hailed by Ramaphosa as an example of cooperation between different spheres of government.

At the time he said Tshwane had approved the rezoning and provision of bulk water, electricity and sanitation services.

The development is expected to create 41 000 job opportunities and consist of 50 000 residential units over two phases. Ramaphosa said it may be one of the largest sectional title developments in the world.

Eskom’s side

In the case of the Mooikloof Mega City, Eskom clearly states in its application to Nersa that it will charge the Nersa-approved Eskom tariffs, should Nersa grant its application.

These tariffs are considerably lower than those the City of Tshwane will charge if it does the distribution.

Eskom in its presentation during the public hearing argued that it is currently supplying electricity to 72 farms in the area. It stated that Tshwane does not have the capacity to do the distribution in the area, and should it develop its own network where Eskom already has a distribution network, it could result in a technically dangerous situation.

According to Eskom it provided budget quotes to the developer as far back as 2015. The utility however admits that the City of Tshwane indicated in 2020 already that it only needs bulk supply from Eskom and will do the distribution itself, with a view to securing the lucrative electricity revenue.

City of Tshwane’s argument

City of Tshwane officials told the Nersa panel that another party is only allowed to distribute electricity in Tshwane’s licensed area with the city’s consent, which it has not given.

The city argues that electricity sales is one of its biggest sources of income and said Eskom will deprive it of this if it proceeds to distribute electricity to the Mooikloof Mega City.

According to its representatives, the City of Tshwane is more than capable and has provided for power distribution to this development in its planning.

In its support for the Tshwane objection Salga accused Eskom of infringing on the exclusive right of municipalities to distribute electricity and of competing with municipalities by doing so. Salga deems this unfair, since Eskom is also the bulk supplier.

Salga asked Nersa not to consider Eskom’s application, unless it has the blessing of the City of Tshwane. It also asked Nersa to investigate if Eskom abused its dominant position by being player and referee.

It called on Nersa to give the City of Tshwane the right of first refusal to the electricity distribution to the Mooikloof Mega City. It further asked Nersa to amend the Eskom distribution licence so that it will be obliged to enter into a service level agreement with the relevant municipality wherever it does electricity distribution.

The matter has not yet been finalised by Nersa.